How would you feel if you strolled into your local Costco and saw ‘Tiffany’ diamond solitaire engagement rings on sale?
Would you be excited at the prospect of being able to buy a stunning piece of jewellery from one of the world’s most exclusive brands? Or would you think to yourself, “Ah, Costco are stocking rings with a solitaire diamond set among six prongs?”
This is a key part of a years-long legal battle that is currently being fought in the U.S. between jewellery giants Tiffany & Co. and multi-national wholesale behemoth Costco. It all began on – of all days – Valentine’s Day, February 14th 2013, when Tiffany & Co. filed suit against Costco, accusing it of trademark infringement, counterfeiting and unfair business practices. There was no love lost between the two parties, as Tiffany announced that they were looking for damages in tens of millions of dollars while Costco fired back with a countersuit. They denied infringement/counterfeiting liability, asserted defences (including fair use), and sought to have Tiffany & Co’s registered trademark invalidated on the grounds that it is a generic term.
Trademark or generic term?
Costco had indeed been selling diamond engagement rings as “Tiffany” rings in their stores, and some of them were on sale for as much as $6,000, which is what led to the lawsuit. So it was in September 2015 at the U.S District Court for the Southern District of New York, that Judge Laura Taylor Swain found that Costco was indeed liable for trademark infringement and counterfeiting by using the “Tiffany” term in their stores. It was argued that by doing so, they were confusing customers into believing that the rings were produced by Tiffany & Co, despite this not being the case. “No rational finder of fact could conclude that Costco acted in good faith in adopting the Tiffany mark,” said Judge Swain at the time, while also dismissing Costco’s counterclaim and defences. Costco were required to pay $21 million in damages as a result.
But it didn’t end there. The District Court ruling was decided on summary judgement, meaning that there was no full trial and that the jury had only to decide the amount of monetary damages to be awarded to Tiffany & Co. Costco felt that they had been deprived of “the opportunity to present its case to a jury”. A key part of Costco’s argument was that the name “Tiffany” was in fact a generic term short for “Tiffany setting,” meaning a specific ring style in which a diamond solitaire is set within six prongs. Their assertion was that they were using the name in this way, to describe the type of ring, rather than suggesting or identifying the jewellery as having come from Tiffany & Co. The rings were also sold to customers in non-Tiffany branded packaging, while the jewellery itself bore no Tiffany hallmarks.
Costco bites back
As a result, the case went to the U.S. Court of Appeals for the Second Circuit and, on August 17th 2020, a three-judge panel held that the District Court decision was in error, that a jury should have been consulted, and siding instead with Costco in a 3-0 decision. The matter has now been remanded to the District Court for a new trial to decide whether the term “Tiffany” was used in a descriptive way, or whether its use was a trademark infringement. Tiffany & Co. were quoted in a statement as being “disappointed in the Court’s ruling,” and added that “we have no qualms about trying this case again, and remain confident that a jury will find counterfeiting and infringement upon retrial. The case continues.